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Until VAR's management has a better sense regarding next year's...

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    Until VAR's management has a better sense regarding next year's developments in Chile,IMO it is best to postpone making any significant commitments involving the Rosario resource. My rationale follows:
    Investing in Chile or elsewhere in Latin America demandsattention to the host country's Country Risk rating. In the international bankingworld, a Country Risk rating reflects a country's economic, social,political conditions and events that may adversely affect a financialinstitution's operations.Chile’s economic “miracle”practically eliminated the abject, extreme poverty of the 1970's andreduced its hyper inflation (369% in 1974). Starting under Pinochet,the country undertook a series of economic reforms includingintroducing a 20% VAT, the liberalization of interest rates and theprivatization of banks. Also the 1981 creation of the private pensionsystem provided a solid base for long-term investment in the country.As a result, Chile’s GDP increased by an average 5.4% a year from1986 to 2013, leading to the rise of a middle class which eventuallyreached (pre-COVID) almost 2/3 of the population.
    DBRS's latest country risk rating for Argentina is “Stable” or (B). Still,I believe Argentina is a better risk mid term than Chile despiteChile enjoying a better “Positive” or (A) DBRS rating.Why is Chile not a better bet? Specifically, ChileIMO presently faces a number of substantial country risks that couldaffect foreign investors. These are: 1) the gutting ofthe Private Pension system, 2) the Constitutional assembly and 3) theforthcoming National election.
    Reacting to the COVID-induced economicdownturn, Congress chose this year a short-sighted solution by approving apension withdrawal authorization to up to 40% of each individual'ssaved balances. This defy any type of scrutiny because it runscounter to the Chilean pension system's foundation which is based onlong-term savings as a strategy for investment and growth. To date,the 3 approved withdrawals ( a fourth was just approved) have reducedthe pension balances by an estimated $50 billion or the equivalent of14% of the GDP. This decision has created a future social time bombamong 11 million pensioners (1/3 of the total) which will be forcedto depend on a minimum government pension of $240/month.
    The second factor is the ongoing constitutional reform convention.No one can predict what the outcome of the new constitution will be.At this time it is a moving target. It seems likely it will give thegovernment a greater say in the economy.This represents a hugepotential political risk to local and foreign investment and thenational pension system that has been the engine of the country’sdevelopment.
    The third factor will be the Presidential and the election of the155 members of the National assembly. There is a very highprobability that a far left candidate will be elected and that hewill have a full majority including a very large of Communistparty members. If this is the case, this represents another significantcountry risk. We must only remember that Chavez in Venezuela waselected democratically. Presently, Venezuela no longer conductsfair elections and the country's economy is a mess despite its largeoil fields and vast iron ore mines.
    In closing, no rush regarding the Rosario resource.
 
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